The Union Budget tried to balance between the need to accelerate growth with that of fiscal consolidation. They tried to achieve this through an improvement in the quality of expenditures by shifting the focus from consumption to investment.
The information technology and business process outsourcing (IT-BPO) sector has become one of the most important growth drivers for the Indian economy. The Budget made some changes where we will see an increase in IT spending by the government. As well, they will also be taking some steps that will have a regressive impact.
Media and Entertainment
With a myriad of taxes in various forms and multifarious statutory compliances, the Media and Entertainment (M&E) sector was keenly awaiting the Union Budget. They were not disappointed as the Finance Minister made some important announcements for this sector related to direct and indirect taxes.
There was hope from the business community that the Budget would be viewed as a tool where the government would push forward a reform agenda to help aid economic recovery. However, with the incumbent party losing the state elections in Uttar Pradesh, reform expectations were tempered.
Some key aspects:
- Taxability of Venture Capital Fund (VCF) simplified
- The Small Industries Development Bank of India (SIDBI) to put up an INR 50 billion venture fund for Micro-Small and Medium Enterprises (MSME).
- Dividend distribution tax (DDT) for cases of multi-tiered corporate structures
- Indirect transfer (reversal of Vodafone ruling)
- Introduction of General Anti-avoidance Rule (GAAR)
- Tax Residency Certificate (TRC)
- Issue of shares at a consideration higher than fair market value to residents.